Typically, a consumer who chooses to purchase a new vehicle may seek financing in the form of a loan or lease because of an inability to tender payment in full at a time of purchase. Upon purchase, the new vehicle begins depreciating immediately. Payments toward the loan, however, are tendered in consecutive installments. In one example, only twelve payments may have been tendered when the consumer defaults on the loan. In this situation, the lender who made the loan may choose to repossess the vehicle. Upon repossession, the lender may seek reimbursement from the consumer for an outstanding balance on the loan. The outstanding balance may in part be due to the value of the vehicle 14 being less than the outstanding balance on the loan.
To reduce the lender's exposure to the risk of having the outstanding balance on the loan not satisfied by sale of the repossessed vehicle, lenders typically will assess the credit worthiness of the consumer prior to extending the loan. In some situations, the credit worthiness of the consumer is below a threshold level such that a top-tier lender will refuse to offer financing to the consumer. With that said, loans through top-tier lenders may enhance the credit worthiness of the consumer based on a payment history associated with the loan. The payment histories (i.e., payment toward the loan) are reported to credit reporting bureaus and thus favorable payment histories may improve the consumer's credit.
When the consumer is unable to take advantage of the top-tier lender, the consumer may turn to lending agencies that do not provide the same benefits as the top-tier lending agencies. Moreover, the purchaser may be unable to acquire a new vehicle due to the inaccessibility of lease or finance programs due to aforesaid credit worthiness thresholds. The ability to purchase a new vehicle for relatively less money than it may cost to maintain an older vehicle benefits the consumer and benefits the dealer and its associated companies.